**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-K**
| **x** | ** ** | **Annual report pursuant to section 13 or 15(d) of  the Securities Exchange Act of 1934** |
|-------|------------|-------------------------------------------------------------------------------------------|

 

**for the fiscal year ended June 30, 2006**

**OR**
| **o** | ** ** | **Transition report pursuant to section 13 or  15(d) of the Securities Exchange Act of 1934** |
|-------|------------|-----------------------------------------------------------------------------------------------|

 

**for the transition period from                            to**

**Commission File Number 1-7256**

**INTERNATIONAL ALUMINUM CORPORATION**

(Exact name of Registrant asspecified in its charter)

| **California**  |   | **95-2385235**         |
|-----------------|--------|------------------------|
| (Incorporation) |   | (I.R.S. Employer  No.) |

 

| **767 Monterey Pass Road**                               |   | ** **          |
|----------------------------------------------------------|--------|---------------------|
| **Monterey  Park, California**                           |   | **91754**           |
| (Address of  principal executive office)                 |   | (Zip Code)          |
|                                                     |   |                |
| Registrant’s  telephone number, including area code |   | **(323)  264-1670** |

 

Securities registered pursuant to Section12(b) of the Act:
| Title of Each Class            | ** ** | **Names of Exchanges on Which Registered** |
|--------------------------------|------------|--------------------------------------------|
| Common Stock ($1.00 Par Value) |       | New York Stock  Exchange                   |

 

Securities registered pursuant to Section12(g) of the Act:  **None**

Indicate by check mark if the registrant is a well known seasonedissuer, as defined in Rule 405 of the Securities Act. Yes   o   No   x

Indicate by check mark if the registrant is not required to file reportspursuant to Section 13 or Section 15(d) of the Exchange Act. Yes   o   No   x

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 of the Securities Exchange Act of 1934 duringthe preceding 12 months and (2) has been subject to such filing requirementsfor the past 90 days. Yes   x   No   o

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of Registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer  o     Acceleratedfiler  x     Non-acceleratedfiler  o

Indicate by check mark whether the registrant is a shell company ( asdefined in Rule 12b-2 of the Exchange Act). Yes   o   No   x

The aggregate market value of the registrant’s common stock held bynon-affiliates of the registrant on December 30, 2005, the last business day ofthe registrant’s most recently completed second fiscal quarter, was $95,115,741(based on the closing sales price of the registrant’s common stock on thatdate).  As of September 1, 2006, 4,305,338shares of the registrant’s common stock were issued and outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

Registrant’s Annual Report to Shareholders for fiscal year ended June30, 2006 is incorporated by reference into Parts I and II.

Portions of the Registrant’sdefinitive Proxy Statement for the 2006 Annual Meeting of Shareholders areincorporated by reference into Part III.

 

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PART                    I

ITEM 1.                             BUSINESS

a.               GENERAL DEVELOPMENT OF BUSINESS

International Aluminum Corporation is an integratedbuilding products manufacturer of diversified lines of quality aluminum andvinyl products.  The Company wasincorporated in California in 1963 as successor to an aluminum fabricatingbusiness begun in 1957 and maintains its executive offices at 767 Monterey PassRoad, Monterey Park, California 91754. The Company’s telephone number is (323) 264-1670.  Reference to the “Registrant”, “InternationalAluminum Corporation” or the “Company” includes International AluminumCorporation and its subsidiaries unless the context indicates otherwise.

b.              FINANCIAL INFORMATION ABOUT SEGMENTS

This information is includedon pages 4 and 24 of the Registrant’s 2006 Annual Report to Shareholders and ishereby incorporated by reference.

c.                  NARRATIVEDESCRIPTION OF BUSINESS

Processes and Products

Residential

Residential products are fabricated from aluminumand vinyl into a broad line of horizontal sliding windows, vertical slidingwindows, casement windows, garden windows, bay and bow windows, specialconfiguration windows, louvre windows, patio doors and related products.  These products are used in new residentialconstruction and in remodeling, home improvement and replacement.

Commercial

Commercial products are fabricated from aluminuminto curtainwalls, window walls, slope glazed systems, storefront framing,entrance doors and frames and commercial operable windows for exteriorapplications, including storm and blast resistant applications andofficefronts, office partitions, doors and frames for interiorapplications.  These products areutilized in varying combinations to produce systems used for office andcommercial construction, remodeling and tenant improvement applications.

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Aluminum Extrusion

In the extrusion process, heated aluminum billetsare hydraulically forced through steel dies to produce a piece of metal of thedesired cross-sectional shape and length. The extrusions are then cut and, when requested, anodized or painted ina variety of finishes in the Company’s anodizing and painting departments.

Aluminum extrusions produced by the Company are usedin fabricating substantially all of its other aluminum products. During fiscal2006, approximately 48% of extrusions produced were sold to non-affiliatedcustomers.  The Company also furnishesdesign services to assist its customers in developing or better utilizingcustom extrusions.

Sales and Distribution

The Company markets its residential products primarilyto lumber yards, home improvement centers, independent dealers and distributors.  Commercial building products are marketedprimarily to glazing and tenant improvement contractors.  Aluminum extrusions are marketed principallyby direct sales to other manufacturers. The Company has no long-term contracts with customers.

Each of the Company’s subsidiaries has its ownadministrative and sales organizations. Sales are made primarily in North America.

No customer accounted for more than 5% of net salesin 2006, and no material part of the business is dependent upon a singlecustomer or a few customers, the loss of any one or more of whom would have amaterially adverse effect on the business of the Company.  The Company does business on a current basisand has no significant backlog of unfilled firm orders.

Seasonality

Sales of products designed for residential andcommercial applications are subject to cyclical swings in new construction activityand to seasonal fluctuations due to reduced construction activity in somemarketing areas during the winter months (second and third quarters).

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Materials

The Company purchases its aluminum requirements fromprimary aluminum producers under supply agreements at market prices, or spotmetal brokers.  Although increasedworldwide demand produces periods of tight supply of aluminum, the Company hashad satisfactory experience to date in obtaining sufficient raw materials tomeet its requirements and does not anticipate material shortages that wouldsignificantly hamper its operations.

Flat glass used in the Company’s products ispurchased from domestic glass manufacturers. The Company has had satisfactoryexperience to date in obtaining sufficient glass to meet its requirements.

The Company produces the aluminum extrusions used inthe products it manufactures and sells. Vinyl, hardware and small parts are purchased from numerous outsidesources.

Working Capital

To maintain an adequate supply of aluminum to meetcustomer delivery requirements and to assure itself of a continuous allotmentof materials from its suppliers, the Company may at times carry a significantinventory of aluminum.  Depending onprice and availability, bulk quantities may be purchased from either primaryaluminum producers or from spot metal brokers.

The Company does not believe there are any abnormalworking capital requirements associated with any of its product groups asmerchandise is normally produced for specific customer orders or shipped frominventory.  As a general practice,extended payment terms are not granted to customers.

Employees

As of June 30, 2006, the Company had approximately1,600 full-time employees, approximately 750 of whom were covered by variouscollective bargaining agreements. Management believes that the Company’s employee relations are good.  No collective bargaining agreements are dueto expire in the upcoming year.

Patents

The Company has no material patents, either issuedor pending, and is not a party to any significant licensing agreements.

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Competition

The Company’s business is highly competitive.  Competition in all product lines is on thebasis of price performance, quality, brand reputation, style, delivery,customer service and exclusivity.  Themanner and extent of such competition depends on the product and relevantmarketing area.  The Company facescompetition primarily from numerous fabricators. Several of the Company’s majorcompetitors in selling commercial products and aluminum extrusions aresubstantially larger, more diversified and have greater resources than theCompany.

Expansion of its product lines could result in theCompany competing with certain of its present customers.  While the Company cannot accurately predictthe effect, if any, that such development would have on its business, theCompany anticipates no material adverse effect.

Government Regulation

The Company’s aluminum extrusion,anodizing, painting and manufacturing facilities are subject to water and airpollution control standards mandated by federal, state and local laws. Whilethe Company anticipates no material capital expenditures to meet establishedenvironmental quality control standards, there can be no assurance that morestringent standards will not be established which might require suchexpenditures.

The Company is subject to various federal and statelabor laws which govern its relationship with employees, including with regardto minimum wage requirements, overtime pay and other working conditions.  Significant new government-imposed increasesin minimum wage rates, paid leave of absence or mandated health benefits couldhave an adverse effect on our results of operations.

d.                                                              FINANCIAL INFORMATION ABOUT FOREIGN ANDDOMESTIC OPERATIONS

The information concerning income before taxes offoreign and domestic operations for fiscal years 2006, 2005 and 2004 is setforth in Note 9 to the consolidated financial statements included on page 23 ofthe Company’s 2006 Annual Report incorporated herein by reference.  There is no other significant relatedinformation regarding foreign operations.

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e.                                                               AVAILABLE INFORMATION

The Company maintains a website at www.intlalum.com.  The Company makes available on its website,free of charge, its periodic reports filed with the Securities and Exchange Commission,or SEC, as soon as is reasonably practicable after filing.  The public may read and copy any materials wefile with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,Washington, DC 20549.  The public mayobtain information on the operation of the Public Reference Room by calling theSEC at 1-800-SEC-0330.  The SEC maintainsan internet site (http://www.sec.gov) that contains our reports, proxy andinformation statements, and other information regarding issuers that fileelectronically with the SEC.

The Company posts on its website its Code ofBusiness Conduct and Ethics for all employees as well as its separate Code ofEthics for Senior Executive Officers and Senior Financial Officers.  The Company will furnish, without charge, acopy of its Code of Business Conduct and Ethics and Code of Ethics for SeniorExecutive Officers and Senior Financial Officers to any person uponrequest.  Such request should be made tothe Company at 767 Monterey Pass Road, Monterey Park, California 91754,Attention: Corporate Secretary.

ITEM 1A.              RISK FACTORS

Our business and operations are subject to a numberof risks and uncertainties.  Theseinclude, but are not limited to, those discussed below in this Section 1A,which we consider to be most relevant to our current business activities.  These risks and uncertainties could cause ouractual future business and financial results to differ from our past results.  They also could cause our actual results tovary from expected results described in statements elsewhere in this Reportthat constitute “forward-looking statements” under the Private SecuritiesLitigation Reform Act of 1995.  Theoccurrence of any of these risks or uncertainties, or of other risks anduncertainties not presently known to us or that we consider immaterial at present,could have a material adverse effect on our business, financial condition, andresults of operations.

**Our business isdependent upon residential and commercial real estate construction andremodeling activities and declines in these activities could adversely affectour revenues and results of operations.**

Our revenues and results of operations are directlyaffected by levels of new residential and commercial real estate constructionand remodeling and replacement activities in North America, and declines inthese activities could adversely affect our revenues and results of operations. Mortgage lending rates

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and other prevailing interest rates, energy costs, consumer confidence,general and regional economic conditions and weather conditions, generally, cansignificantly impact the levels of these activities. New housing starts in ourprimary geographic markets have declined in recent months, and there is no assurancethat they will not decline further.  Historically,we have sought to offset the impact on our revenues of declines in residentialand commercial real estate activities by seeking to increase our market sharein the geographic markets we serve and, to a lesser extent, new productintroductions and expansion into new geographic markets.  Historically, we have not pursued growththrough acquisitions, although we may seek to do so at any time. Consequently,our financial performance will depend, in part, upon our ability to increaseour penetration in our existing markets and to introduce new products or enternew geographic markets in the event of such declines.

**We facesignificant competition.**

The markets for our residential and commercialproducts are highly competitive. Competition in our residential, commercial and extrusion segments isbased largely on price performance, quality, brand reputation, style, delivery,customer service and exclusivity. Although the relative importance of such factors varies among ourcustomers and product categories, price is often a primary factor.  Our ability to maintain or increase ourmarket positions and to grow our businesses depends to a significant extentupon our success in managing our cost structure and competing effectively onprice.

**Our operatingresults are affected by the cost and availability of aluminum, vinyl resins,glass and other commodities, and cost increases may adversely affect ourresults of operations.**

If we experience unexpected or unusual costincreases for raw materials, energy or other commodities, it may be difficultfor us to pass these increased costs on to our non-affiliated customers due tooutstanding commitments, competitive considerations and our customers’resistance to accepting such price increases. We have occasionally encountered unusual price increases in aluminum rawmaterials due to supply shortages or other factors.  A substantial increase in the cost of rawmaterial or other commodities from our suppliers could adversely impact ourresults of operations.

**Our ability togrow could be adversely affected if we are not successful in developing oracquiring new facilities.**

We may seek to expand ourbusiness by developing or selectively acquiring new facilities.  Our ability to grow could be adverselyaffected if we are not successful in our development and acquisitionactivities.

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**We are subject topotential product liability claims and other litigation, which could be costlyto defend and could result in liability to us.**

Residential and commercial builders and remodelers,including our customers, are increasingly subject to construction defect andwarranty claims in the ordinary course of their business.  These claims are increasingly leading toproduct defect and similar claims, including putative class actions, againstmanufacturers of roofing, siding, windows and similar building components.  We also are subject to direct claims forproduct liability that can be costly to defend and can result in significantliability.  See Part I, Item 3,and Note 4 to the Notes of Consolidated Financial Statements included inItem 8 of this Report for additional information about litigationinvolving our businesses, including a pending class-action lawsuit based uponalleged defects in some of our residential aluminum window products.

**Our internationalbusiness has different risks from those of our United States business,including currency exchange risks.**

Approximately 6% of our sales are derived outside ofthe United States (principally in Canada) and are transacted in currenciesother than U.S. Dollars (principally the Canadian Dollar).  Our international business faces political,monetary, economic and other risks that vary from those facing our UnitedStates operations.  Our operating resultsalso can fluctuate based on changes in U.S. Dollar exchange rates, which alsopresent difficulties in comparing our operating performance from period toperiod.

**The loss of keyexecutives and our failure to attract additional qualified management personnelcould negatively impact our business and operations.**

We depend highly upon our senior managementpersonnel, and we anticipate the need to hire additional qualified persons toadd depth to our management team.  Wealso will need to hire and train additional managers in connection with anyincreased development or acquisition of new facilities.  The loss of the services of any member of oursenior management, or our inability to hire, train and effectively utilizeadditional qualified management personnel, could have a material adverse effecton our business and operations.

Our administrative expenses also will increase tothe extent we hire additional management personnel.

**Our revenues andresults of operations will fluctuate.**

Our revenues, expenses, and results of operationswill vary from quarter-to-quarter as a result of a number of factors, many ofwhich are outside our control.  Thesefactors include:

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·                  seasonal and cyclicalchanges that may adversely affect the residential and commercial real estateconstruction markets;

·                  demand and price for ourproducts;

·                  fluctuations in the price of raw materialsand other commodities;

·                  delays in developing and introducing products;

·                  unexpected downtime inoperations due to work stoppages or other employee problems;

·                  increased expenses relatedto operations, administration, litigation claims, or otherwise;

·                  the mix of revenues derived from productsales;

·                  the hiring, retention, andutilization of management and other personnel;

·                  general economic factors;

·                  changes in generallyaccepted accounting principles affecting our reported financial results; and

·                  changes in tax laws and theeffect on our effective tax rates.

**We may undertakestrategic transactions that may fail to occur or to enhance shareholder value.**

From time to time, we may consider possiblestrategic transactions, including potential acquisitions, dispositions, andother alternatives, with the goal of increasing shareholder value.  We may incur significant transaction costs inconnection with any such transaction, whether or not any transaction isactually completed.  Any strategictransaction we complete also may result in non-recurring or other charges andmay pose significant integration challenges and management and businessdisruptions, any of which could adversely affect our results of operation andbusiness prospects.

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**We may be liablefor contamination or other harm caused by materials that we handle, and changesin environmental regulations could cause us to incur additional expense.**

Our manufacturing operationsinvolve the handling of hazardous materials, and we are subject to federal,state and local laws and regulations governing the use, handling, storage anddisposal of hazardous materials.  Ifviolations of environmental, health and safety laws occur, we could be held liablefor damages, penalties and costs of remedial actions, which could have amaterial adverse effect on our financial condition and results ofoperations.  We may violateenvironmental, health and safety laws in the future as a result of human error,equipment failure or other causes. Environmental laws also could become more stringent in the future,imposing greater compliance costs and increasing risks and penalties associatedwith violations.  We may be subject topotentially conflicting and changing regulatory agendas of political, businessand environmental groups.  Our failure tocomply with new or existing laws or regulations could harm our business andresults of operations.  Changes to orrestrictions on permitting requirements or processes, hazardous or biologicalmaterial storage or handling might require an unplanned capital investment orrelocation of our facilities, which could adversely affect our business andoperations.

**We may be unableto obtain permits that are required to operate our business.**

Although we have obtainedpermits necessary to operate our existing facilities the granting of thesepermits is also often subject to resistance from citizen or other groups andother political pressures.  Our failureto obtain or renew the permits necessary to operate our facilities could have amaterial adverse effect on our business and operations.

**The market priceof our stock is subject to fluctuation.**

The market price of ourcommon stock is likely to fluctuate and could be adversely affected by manyfactors, including:

·                  announcements of newproducts or new strategic relationships by us or our competitors;

·                  actual or anticipatedfluctuations in our operating results due to declines in revenues, increasedexpenses or other factors;

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·                  changes in financialestimates by securities analysts, and whether our earnings meet or exceed suchestimates;

·                  conditions and trends in ourindustry, including cyclical declines in the residential or commercial realestate construction activity;

·                  general economic and marketconditions and other factors;

·                  the adoption andimplementation of new accounting standards; and

·                  the occurrence of any of theother risks described in this Form 10-K or in our future filings with theSecurities and Exchange Commission.

**Any disruption atour facilities could increase our expenses.**

We take precautions tosafeguard our facilities against the risks to which they are subject, includingby means of insurance and health and safety protocols.  However, a natural disaster, such as a fire,flood or earthquake, could cause substantial disruptions in our operations,damage or destroy our manufacturing equipment or inventory, and cause us toincur additional expenses. The insurance we maintain against fires, floods,earthquakes and other natural disasters may not be adequate to cover our lossesin any particular case.

**Our financialresults for future periods may be adversely affected by changes required byfinancial and accounting regulatory agencies.**

Our reported financialresults may be adversely affected by changes in accounting principles.Generally accepted accounting principles in the United States are subject tointerpretation by the Public Company Accounting Oversight Board, the Securitiesand Exchange Commission, and various bodies formed to promulgate and interpretappropriate accounting principles. A change in these principles orinterpretations could have a significant effect on our reported financialresults, and could affect even the reporting of transactions completed beforethe announcement of a change.  Althoughwe believe that our accounting practices are consistent with current accountingpronouncements, changes to or interpretations of accounting methods or policiesin the future may require us to reclassify, restate or otherwise change or reviseour financial statements.

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**Concentration ofownership by our principal shareholder may prevent a change of control andinfluence other significant corporate decisions.**

As of June 30, 2006,Cornelius C. Vanderstar owned beneficially more than 40% of our outstandingcommon stock. As a result of his ownership, Mr. Vanderstar will be able to significantlyaffect the outcome of any matters requiring shareholder approval, including theelection of directors and approval of mergers and other significant corporatetransactions, and will have significant control over our management andpolicies.  Mr. Vanderstar, who was 91 asof June 30, 2006, may have interests that are different from those of ourshareholders, generally, and may support proposals and actions with which ourother shareholders may disagree.  Theconcentration of ownership of our outstanding stock could discourage apotential acquirer from attempting to obtain control of our company, which inturn could adversely affect the market price of our common stock.  In addition, Mr. Vanderstar could use his votingpower to effectively maintain our existing management and directors in office,delay or prevent changes of control of our company, or support or reject othermanagement and board proposals that are subject to shareholder approval, suchas adoption or amendments to employee stock option plans and approvals ofsignificant financing transactions.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.  PROPERTIES

The following table sets forth informationconcerning the location, size and use of the Company’s present facilities:
|                         | ** ** | **Square**        | ** ** | ** **               | ** ** |
|-------------------------|------------|-------------------|------------|--------------------------|------------|
| **Location**            | ** ** | **Feet (A)** | ** ** | **Use**                  | ** ** |
|                    |       |              |       |                     |       |
| Alhambra, CA            |       | 185,000           |       | Aluminum  extrusions,    |       |
|                         |       |              |       | foundry  & finishing |       |
| Waxahachie, TX          |       | 269,000           |       | Aluminum  extrusions     |       |
|                    |       |              |       | &  finishing         |       |
| South Gate, CA          |       | 189,000           |       | Residential  products    |       |
| Hayward, CA             |       | 149,000           |       | Residential  products    |       |
| Phoenix, AZ             |       | 100,000           |       | Residential  products    |       |
| Vernon, CA              |       | 134,000           |       | Commercial  products     |       |
| Bedford Park, IL        |       | 81,000            |       | Commercial  products     |       |
| Boston, MA              |       | 15,000            | (L)        | Commercial  products     |       |
| Detroit, MI             |       | 12,000            | (L)        | Commercial  products     |       |
| Waxahachie, TX          |       | 159,000           |       | Commercial  products     |       |
| Denver, CO              |       | 16,000            | (L)        | Commercial  products     |       |
| St. Louis, MO           |       | 23,000            | (L)        | Commercial  products     |       |
| Dallas, TX              |       | 36,000            | (L)        | Commercial  products     |       |
| Houston, TX             |       | 19,000            | (L)        | Commercial  products     |       |
| Rock Hill, SC           |       | 74,000            |       | Commercial  products     |       |
| Atlanta, GA             |       | 37,000            | (L)        | Commercial  products     |       |
| Baltimore, MD           |       | 20,000            | (L)        | Commercial  products     |       |
| Langley, B.C., Canada   |       | 63,000            |       | Commercial  products     |       |
| Guelph, Ontario, Canada |       | 72,000            |       | Commercial  products     |       |
| Houston, TX             |       | 57,000            |       | Commercial  products     |       |
| Waxahachie, TX          |       | 60,000            |       | Commercial  products     |       |
| Dallas, TX              |       | 14,000            | (L)        | Commercial  products     |       |
| Monterey Park, CA       |       | 19,000            | (L)        | Executive offices        |       |

 

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(A)  Includes manufacturing,warehouse and office space; excludes construction in process, parking and yardstorage space.

(L)  Indicates leased premises.

Of the 1,803,000 square feet exhibited above, 1,592,000square feet are owned by the Company. The balance of 211,000 square feet is leased under agreements expiringat various dates.  The Company believesthat its facilities are adequate for its current and anticipated future levelsof operations.

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ITEM 3.  LEGAL PROCEEDINGS

Klotzer, et al. v. International Windows In Time,Inc.

International Aluminum Corporation and certain ofits subsidiaries are defendants in the above-referenced lawsuit (Case no.FCS021196) filed in December 2002 in the Superior Court for Solano County,California.  The plaintiffs in thelawsuit are the owners of seven homes in which the Company’s Series 6200 windowsare installed.  The same lawyers whorepresent them in this action have also brought similar class actions againstother manufacturers of aluminum windows in California

In their Third Amended Complaint filed in August2005, the plaintiffs assert various causes of action, including strict productliability, breach of warranty, and violation of the California Consumer LegalRemedies Act.  The plaintiffs alsopurport to represent a statewide class of persons who own buildings inCalifornia that contain the Company’s Series 6200 horizontal sliding, verticalhung, or fixed aluminum windows manufactured during the period 1993 to thepresent.  In November 2005, the Courtcertified the plaintiff class.

According to plaintiffs, the essence of their claimsis that the Series 6200 windows leak at the lower corners.  Plaintiffs contend that these leaks arecaused by the design and manufacture of the lower corners and voids and gaps inthe sealant used in the window corners; and that the leaking windows havedamaged parts of the homes in which they were installed.  Plaintiffs also claim that the windows do notperform as warranted and do not perform in compliance with AmericanArchitectural Manufacturer’s Association, or AAMA, standards.  The Company denies all of these allegations.

There are approximately 80,000 owners of the Series6200 windows in the class.  The namedplaintiffs seek actual and punitive damages, as well as injunctive andrestitutionary relief on their claims, including the cost to remove and replaceall of the Series 6200 windows in the class. The Company denies any liability.

The Company’s insurers have accepted the defense ofthis lawsuit under reservation of rights. The scope of the Company’s insurance coverage may depend upon theultimate disposition of the plaintiffs’ claims.

The Company believes the plaintiffs’ claims arewithout merit, and it intends to vigorously defend this lawsuit.  The lawsuit is in the discovery phase, andthe Company cannot predict its outcome or the extent to which insurance wouldbe available to cover any eventual judgment or settlement in the lawsuit.

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OtherMatters

The Company is regularly involved in a number oflawsuits and proceedings arising in the ordinary course of its business andoperations.  The Company does not expectthese matters, individually or in the aggregate, to have a material adverse effecton the Company’s financial condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS

None.

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PART II

ITEM 5.         MARKET FOR REGISTRANT’S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded on the New YorkStock Exchange under the symbol IAL.  Themarket and dividend information included on page 10 of the Company’s 2006Annual Report to Shareholders is incorporated herein by reference.

There are no restrictions of future cash dividends.

There were approximately 280 shareholders of recordof the Company’s common stock at June 30, 2006.

ITEM 6.        SELECTEDFINANCIAL DATA

Selected financial data pertaining to the Companyfor the last five years is set forth on page 4 of the Company’s 2006 Annual Reportto Shareholders and is incorporated herein by reference.

ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

This information is set forth on pages 2through 10 of the Company’s 2006 Annual Report to Shareholders and isincorporated herein by reference.

ITEM 7A.     QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Fluctuating foreign exchange rates mayimpact the Company’s earnings.  TheCompany’s foreign exchange exposure is related exclusively to activitiesassociated with its Canadian subsidiaries. The Company does not attempt to manage these risks by entering intoforward exchange contracts.

ITEM 8.        FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15, which is incorporated hereinby reference.

ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE

None.

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ITEM9A.       CONTROLSAND PROCEDURES

Evaluation of DisclosureControls and Procedures

Under Securities and Exchange Commission, or SEC,rules, the Company is required to maintain disclosure controls and proceduresdesigned to ensure that information required in the reports that the Companyfiles or submits under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms.  As part of theCompany’s system of disclosure controls and procedures, we have created aDisclosure Committee, which consists of certain members of the Company’s seniormanagement.  The Company’s disclosurecontrols and procedures are designed to ensure that information required to bedisclosed by the Company in the reports that it files or submits under theSecurities and Exchange Act of 1934 is accumulated and communicated tomanagement, including the chief executive officer, chief financial officer andother members of the Disclosure Committee, as appropriate to allow timelydecisions regarding required disclosure.

The Company has carried out an evaluation of theeffectiveness of the design and operation of its disclosure controls andprocedures as of the end of the period covered by this report.  The Company’s management, including theCompany’s Disclosure Committee, chief executive officer and chief financialofficer, supervised and participated in the evaluation.  Based on the evaluation, the chief executiveofficer and the chief financial officer concluded that the Company’s disclosurecontrols and procedures were effective as of the end of the period covered bythis report.

See “MANAGEMENT’S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING” for management’s report on our internal control overfinancial reporting appearing in the Company’s 2006 Annual Report toShareholders.

See “REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM” for our independent registered public accounting firm’s reporton our internal control over financial reporting appearing in the Company’s2006 Annual Report to Shareholders.

Changes in Internal Control Over Financial Reporting

The Company’s evaluation of its internal controlover financial reporting during the fourth quarter of the year ended June 30,2006 identified no change in the Company’s internal control over financialreporting that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

ITEM9B.         OTHER INFORMATION

None.

PART III

The information required under Part III will becontained in the Company’s definitive Proxy Statement for the 2006 AnnualMeeting of Shareholders, which information is incorporated herein by reference.

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PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following itemscontained in the Company’s 2006 Annual Report to Shareholders are incorporatedherein by reference:
|        | ** ** | ** **                                                                                | **Page** |
|--------|------------|-------------------------------------------------------------------------------------------|----------|
| (a)    | 1.         | Financial Statements                                                                      |     |
|   |       | Consolidated  Financial Statements                                                        |     |
|   |       | Balance sheets -  June 30, 2006 and 2005                                                  |     |
|   |       | Statements for  the three years ended June 30, 2006 -                                     |     |
|   |       | Income                                                                                    |     |
|   |       | Shareholders’  equity                                                                |     |
|   |       | Cash flows                                                                                |     |
|   |       | Notes to  consolidated financial statements                                               |     |
|   |       | Report of  Independent Registered Public Accounting Firm                                  |     |
|   |       |                                                                                      |     |
|   | 2.         | Financial Statement Schedules                                                             |     |
|   |       | Report of  Independent Registered Public Accounting Firm on Financial Statement Schedule  | F-1      |
|   |       | Schedule  for the three years ended June 30, 2006 - II Valuation and qualifying  accounts | F-2      |

 

The following exhibits are filed as part of thisreport:

(a)  3.  Exhibits

|  3.1 |   | Restated  Articles of incorporation of International Aluminum Corporation                                                                                                                  |
|-----------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  3.2 |   | By-laws of  International Aluminum Corporation                                                                                                                                             |
| 10.1      |   | International  Aluminum Corporation 1991 Stock Option Plan                                                                                                                                 |
| 10.2      |   | International  Aluminum Corporation 2001 Stock Option Plan                                                                                                                                 |
| 10.3      |   | Schedule of  Non-Employee Director Compensation                                                                                                                                            |
| 10.4      |   | Collective  Bargaining Agreement dated November 1, 2005, between our International  Extrusion Corporation subsidiary and Cabinet Makers, Millmen and Industrial  Carpenters Local 721.     |
| 10.5      |   | Collective  Bargaining Agreement dated December 5, 2004 between our United States  Aluminum Corporation subsidiary and International Brotherhood of Teamsters  Local Union #986.           |
| 10.6      |   | Collective  Bargaining Agreement dated March 1, 2005 between our International Window  Northern California subsidiary and Glaziers Architectural Metal & Glass  Workers Local 1621.    |
| 10.7      |   | Collective  Bargaining Agreement dated June 5, 2005 between our International Window  Arizona, Inc. subsidiary and Industrial Carpenters Local Union No. 2093.                             |
| 10.8      |   | Collective  Bargaining Agreement dated March 27, 2006 between our International Extrusion  Corporation/Texas subsidiary and Teamsters, Local 19, Airline, Aerospace and  Allied Employees. |
| 10.9      |   | Revolving Note  Agreement dated as of November 4, 2005, between International Aluminum  Corporation and City National Bank.                                                                |

 

17

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| 10.10 |   | Change of  Control Agreement dated as of September 8, 2006, between International  Aluminum Corporation and Ronald L. Rudy.                            |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.11 |   | Change of  Control Agreement dated as of September 8, 2006, between International  Aluminum Corporation and William G. Gainer.                         |
| 10.12 |   | Change of  Control Agreement dated as of September 8, 2006, between International  Aluminum Corporation and Mitchell K. Fogelman.                      |
| 10.13 |   | Change of  Control Agreement dated as of September 8, 2006, between International  Aluminum Corporation and Michael J. Norring.                        |
| 13.1  |   | Annual Report to  Shareholders                                                                                                                         |
| 14.1  |   | Code of Business  Conduct and Ethics                                                                                                                   |
| 14.2  |   | Code of Ethics  for Senior Executives and Senior Financial Officers                                                                                    |
| 21.1  |   | Subsidiaries of  the Registrant                                                                                                                        |
| 23.1  |   | Consent of  PricewaterhouseCoopers LLP                                                                                                                 |
| 31.1  |   | Certification of  the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002                                               |
| 31.2  |   | Certification of  the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002                                               |
| 32.1  |   | Certification of  the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2  |   | Certification of  the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b)  Reportson Form 8-K filed during the quarter ended June 30, 2006:

| May 5, 2006 - Reporting the  press release dated May 4, 2006 announcing financial results for the third  quarter ended March 31, 2006. |
|----------------------------------------------------------------------------------------------------------------------------------------|

 

18

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SIGNATURES

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
|        |              | INTERNATIONAL ALUMINUM CORPORATION |
|--------|-------------------|------------------------------------|
|   |              |                               |
| Date:  | September 8, 2006 | By:                                | MITCHELL K.  FOGELMAN |
|   |              |                               | Mitchell K.  Fogelman |
|   |              |                               | Senior Vice  President-Finance; |
|   |              |                               | Chief Financial  Officer and |
|   |              |                               | Secretary |

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the Registrant and in the capacities and onthe dates indicated.
| **Signature**            | ** ** | **Title**                         | ** ** | **Date**          |
|--------------------------|------------|-----------------------------------|------------|-------------------|
| ** **               | ** ** | ** **                        | ** ** | ** **        |
| CORNELIUS C.  VANDERSTAR |       | Chairman of the Board             |       | September 8, 2006 |
| Cornelius C.  Vanderstar |       |                              |       |              |
|                     |       |                              |       |              |
| RONALD L. RUDY           |       | Director; President and           |       | September 8, 2006 |
| Ronald L. Rudy           |       |  Chief Executive Officer     |       |              |
|                     |       |                              |       |              |
| MITCHELL K.  FOGELMAN    |       | Senior Vice President-Finance;    |       | September 8, 2006 |
| Mitchell K.  Fogelman    |       |  Chief Financial Officer and |       |              |
|                     |       |  Secretary                   |       |              |
|                     |       |                              |       |              |
| MICHAEL J.  NORRING      |       | Controller and Chief              |       | September 8, 2006 |
| Michael J.  Norring      |       |  Accounting Officer          |       |              |
|                     |       |                              |       |              |
| JOHN P.  CUNNINGHAM      |       | Director                          |       | September 8, 2006 |
| John P.  Cunningham      |       |                              |       |              |
|                     |       |                              |       |              |
| ALEXANDER L.  DEAN       |       | Director                          |       | September 8, 2006 |
| Alexander L.  Dean       |       |                              |       |              |
|                     |       |                              |       |              |
| JOEL F. McINTYRE         |       | Director                          |       | September 8, 2006 |
| Joel F. McIntyre         |       |                              |       |              |
|                     |       |                              |       |              |
| NORMA A.  PROVENCIO      |       | Director                          |       | September 8, 2006 |
| Norma A.  Provencio      |       |                              |       |              |
|                     |       |                              |       |              |
| DAVID C. TREINEN         |       | Director                          |       | September 8, 2006 |
| David C. Treinen         |       |                              |       |              |

 

19

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directorsof

InternationalAluminum Corporation:

Our audits of the consolidated financial statements, of management’sassessment of the effectiveness of internal control over financial reportingand of the effectiveness of internal control over financial reporting referredto in our report dated September 8, 2006 appearing in the 2006 Annual Report toShareholders of International Aluminum Corporation (which report, consolidatedfinancial statements and assessment are incorporated by reference in thisAnnual Report on Form 10-K) also included an audit of the financial statementschedule listed in Item 15(a)(2) of this Form 10-K.  In our opinion, this financial statementschedule presents fairly, in all material respects, the information set forththerein when read in conjunction with the related consolidated financialstatements.

PricewaterhouseCoopers LLP

LosAngeles, California

September 8, 2006

F-1

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INTERNATIONAL ALUMINUMCORPORATION AND SUBSIDIARIES

SCHEDULEII - VALUATION AND QUALIFYING ACCOUNTS

For The Three Years EndedJune 30, 2006
| ** **                      | ** ** | **Balance at** | ** ** | **Amounts**        | ** ** | **Amounts** | ** ** | **Balance at** | ** ** |
|---------------------------------|------------|---------------------|------------|--------------------|------------|-------------|------------|---------------------|------------|
| ** **                      | ** ** | **Beginning**       | ** ** | **Charged**        | ** ** | **Written** | ** ** | **End**             | ** ** |
| **Description**                 | ** ** | **of Year**    | ** ** | **to Income** | ** ** | **Off**     | ** ** | **of Year**    | ** ** |
| ** **                      | ** ** | ** **          | ** ** | ** **         | ** ** | ** **  | ** ** | ** **          | ** ** |
| Reserves for doubtful  accounts |       |                |       |               |       |        |       |                |       |
| 2006                            |       | $                   | 1,244,000  |               | $          | 383,000     |       | $                   | 724,000    |   | $ | 903,000 |   |
| 2005                            |       | 1,447,000           |       | 417,000            |       | 620,000     |       | 1,244,000           |       |
| 2004                            |       | 1,384,000           |       | 446,000            |       | 383,000     |       | 1,447,000           |       |
|                                 |            |                     |            |                    |            |             |            |                     |            |  |  |  |  |

 

F-2

----